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regulatory and
reimbursement
RBRVS:
Not the Right Payment System
for Medical Oncology
by Roberta L. Buell, Managing Partner, Sausalito
Healthcare Partners, and Principal Content Development,
E-Expert Reimbursement Partners
In 1992, the Centers for Medicare & Medicaid
Services (CMS) rolled out an innovative way
of paying for physicians’ services. This system,
which was developed by William Hsiao, MD,
from Harvard, changed the way physicians
were forever after paid by CMS and by
the vast majority of their payors.
managedcareoncology.com 47
From then on, payment would be
based on “resource” inputs – physician
work, practice expense, and relative
malpractice risk – needed to provide
the services.
To compute the payment for a service,
HCFA (now CMS) would multiply the
relative value units (RVUs) for that
service for that year by the geographic
adjustment factors (GAFs) for each set
of RVUs ([work RVUs x work GAFs]
+ [practice expense RVUs x practice
expense GAFs] + [malpractice RVUs
x malpractice GAFs]). These adjusted
total relative values would then be
multiplied by an annual conversion
factor or dollar amount to arrive at
regionally adjusted payment amounts
for all codes paid by the fee schedule.
Seventeen years later, medical
oncologists are still confounded by
the fact that services performed in
the office are not paid fairly in the
Medicare system (if you can call it
a system) or by commercial payors.
Medical oncologists were much less
concerned about the viability of this
system when “buy and bill” drug
margins were quite profitable. But once
Medicare and other payors converted
to an average sales price, some
chemotherapy encounters have become
unprofitable, and, as a result, patients
are sent to the hospital for drug
therapies deemed to be “underwater”
(more costly to perform than the
reimbursement amount). In 2010, it is
currently proposed that Medicare pay
providers an average of $23 per hour
after the first hour of chemotherapy
infusion; our experience is that this
is not profitable for any U.S. medical
oncology practice.
Besides rewarding drug profits, how
did this system go wrong for medical
oncology physicians? And what other
alternatives do payors have to pay
oncologists fairly to avert the hospital
setting without huge increases in drug
expense?
The RBRVS Problem List
The resource-based relative value scale
(RBRVS) is a subjective exercise. The
cornerstone of RBRVS is the face-to-face
time that a physician spends with the
patient, which supports the number of
work RVUs a code is assigned. There
are relative values for practice expense,
but these are not based on cost reports,
which is how Medicare pays hospitals
for overhead. These practice overhead
RVUs are based on surveys, which often
are answered without quantitative data.
This means that office-based surgeries,
infusions, and other procedures
without technical and professional
components are vastly undervalued by
the RBRVS payment system.
David H. Regan, MD, who practices
with Northwest Cancer Specialists
in Portland, Ore., represented the
American Society of Clinical Oncology
on the Relative Value Scale Update
Committee (RUC) when the American
Medical Association (AMA) reviewed
the drug administration relative
values. During the Congress-mandated
restructuring of the drug-infusion
coding system, Dr. Regan co-chaired
a drug administration work group
subcommittee of the RUC, which
governs the valuation of work relative
values.
48 managedcareoncology Quarter 4 2009
Dr. Regan’s involvement in the RUC
demonstrates the difficulty of valuing the types of service codes used in
medical oncology when they involve
determining physician work, as he
outlines below. Even if the AMA tried
to reevaluate the codes, the data that it
collected from physicians was flawed to
begin with.
“Considering the nature of the oncologist’s pre-, intra-, and post-treatment
patient interaction during chemotherapy encounters, it’s difficult to put a
number on supervisory work,” he says.
“Also, while physicians may not want
to take the time to participate, or they
may not thoroughly understand the
questions, statistical validity requires
a large-enough sample and reliable
answers.”1
A more diabolical picture of the RUC
discriminating against services where
cognition is dominant is painted in the
Annals of Internal Medicine. The authors
state that “many RUC members from
procedural specialties tend to vote in
favor of requested increases. In summary, the RUC process favors increases
in procedural and imaging reimbursement for three reasons: specialty society
influence in proposing RVU increases,
the specialist-heavy RUC membership, and the desire of RUC specialists
to avoid increases in evaluation and
management RVUs. With their ability
to create new codes and influence RVU
updates, many procedural specialists can
influence fees in a way that can substantially overvalue procedural and imaging
services.”2 In other words, the RBRVS fix
is in for procedural specialties.
Oncologists also believe that practice
expense is undervalued. They have
a good reason to perceive this. Since
2007, practice expense relative val-
ues for almost all the prevalent drug
administration codes have gone down,
while actual office expenses have stayed
level or increased. However, practice
expense relative values are calculated
using survey data and formulas that are
so convoluted, it is hard to prove one
way or the other. However, if you look
at the practice expense relative values
in the Medicare fee schedule for 2008
for the second hour of chemotherapy
(CPT* 96415), the practice expense payment is 0.67 (or about $24). From a
logical perspective, this does not appear
adequate for nurse supervision, use
of the chemotherapy room, intravenous supplies that are not separately
paid, and so forth. This does not even
consider capital costs, the administrative costs of processing claims, and the
working capital needed to purchase
expensive drugs and biologics.
The biggest wrinkle in Medicare
payment is the update to the conversion factor known as the sustainable
growth rate, or SGR (an oxymoron – it
is not sustainable and rarely grows).
The SGR ties the annual conversion
factor to growth in the gross domestic
product (GDP), the measure of the
nation’s output of goods and services.
In simple terms, if the GDP goes up,
as it did during the 1990s, the conversion factor goes up, too; if it goes down
or stays about even, as it has for the past
five years, the conversion factor declines
and physicians experience cuts. While
Congress provided a fix to the SGR for
2009, there will be a 21.2% decline in
the conversion factor in 2010 without
additional congressional intervention.
With the changes in RVUs, many medical
oncologists are looking at 23% to 24%
fee schedule reductions. This payment
may shift cancer care away from community providers into the hospital setting.
Private Payors and RBRVS
Since its debut in 1992, RBRVS has
been adopted by private payors as
the system of choice for payment.
Why not? It is a fee schedule that
can be downloaded in EXCEL™ from
the Internet. Here are some of the
obvious problems with the widespread
adoption of this system:
■■ Private payors use RVUs without
examining what Medicare or
the RUC is doing to individual
specialties. This never bothered
medical oncologists, particularly
when the payment rates were high
for drugs, but now it has a material
managedcareoncology.com 49
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multiplier effect throughout
the specialty. These are not
negotiated cuts that passively cut
reimbursements across the specialty
regardless of payor source.
Some experts insist that procedural
specialties are able to negotiate
a different, higher conversion
factor for their procedures than
that paid to cognitive specialties.2
Oncologists sometimes try to
negotiate on drug reimbursement
without paying as much attention
to service codes. However, there is
evidence from electronic remittance
advice data that some payors are
using a higher conversion factor
for drug administration than for
evaluation and management codes.3
Some commercial payors use a
multiple of the total Medicare
allowable as their basis of payment
for service codes. This means that
all the political ebbs and flows of
the RBRVS system and congressional
budget mandates are incorporated in
private payment.
Private payors want to compensate
enough to maintain a community
presence and prevent hospital treatment
– but what to do?
Alternative Payment Methods
Here are some payment methods that
are being tested or implemented in the
market today. We will comment on the
opportunities and problems inherent in
each one:
■■ Supplement Medicare payment.
There are areas where payors supplement RBRVS by paying a per-day or
per-hour facility fee using a miscellaneous code. This is a negotiated
rate that affords medical oncologists
a level of comfort that their underpayments and overhead expenses are
recognized and reimbursed.
■■ Pay for reporting. As you may know,
Medicare in 2009 and 2010 will
pay 2% more for reporting certain
quality indicators to physicians in the
Physician Quality Reporting Initiative.
This effort can be implemented on a
claims, registry, or electronic medical
record generation basis. But for
oncologists, the only option is really
claims-based. All my market research
in this area indicates that at this point
in time fewer than 50% of oncologists
have participated in this effort. One
reason for nonparticipation is that in
2007 the total remuneration averaged
about $600 per physician. So this
certainly has not been a roaring
success in the community cancer
care segment.
■■ Pay for technology. CMS will pay an
incentive from 2009 until 2013 for
physicians to e-prescribe. In 2012 and
thereafter, there will be a discount
from Medicare professional services
for nonadopters of e-prescribing
50 managedcareoncology Quarter 4 2009
■■
■■
technology. In addition, CMS
has given grants to ensure that
e-prescribing technology is affordable.
The problem is that providers have to
want to adopt new technology – old
habits die hard in this market. In the
end, if this initiative works (and that
is a big if), it will be a win-win – less
iatrogenic events, more prescribing
data for payors, and more efficient
prescribing with better benefit
investigation and patient adherence
information for providers. Patient
adherence to expensive oral cancer
agents is a major issue for both
patients and providers. E-prescribing
really supports a better feedback loop
to those managing care.
Pay for performance. The big
buzzword is P4P. In oncology,
this generally means adherence to
clinically relevant guidelines for
chemotherapy and/or supportive care
drugs. By using these pathways, costs
are more predictable, and proven
regimens assure a certain amount of
patient safety. The problem with this
approach is that it is not elegantly
simple. Most chemotherapy regimens
are based on the stage of cancer and/
or whether the patient has failed
other regimens. This information
cannot be transmitted on a claim as
neither the ICD-9-CM or the future
ICD-10-CM diagnosis system conveys
it. So the information must be faxed
in or telephoned to someone and
verified. Also, the perceived reduction
in cost, which has never been
conclusively proven, would stagnate
after a few years if everyone goes on
the same set of guidelines.
Case rates. This idea has been used
for radiation therapy. Based on the
Medicare Diagnosis-Related Group
(DRG) concept, the payor would
pay one contracted rate for a single
diagnosis throughout 90 to 120 days
■■
of care. Again, this payment system
has to be manually transmitted by
fax or telephone as the costs for
different stages and cell types of
cancers vary widely. Case rates would
also vary as to whether the patient
was operated on or not, whether care
was curative or palliative, and the
types of involved providers (medical
oncology, radiation, surgery, and so
forth). This system might work after
years of experience perfects a system
that works well for all major cancers.
But DRGs to date still do not have
the flexibility to accommodate new
technologies. This could be quite
problematic in cancer.
Pay for savings. Plans can look
at their total spend for medical
oncology in terms of the specialty
number and/or groups of codes
billed. If that number is reduced
through the use of approved
regimens, the payor and the
providers share the savings. There
must be approved protocols so that
quality of care does not suffer. This
is an elegant solution in terms of
simplicity, but it is definitely risky in
terms of patient quality of care and is
yet unproven.
In summary, there is no perfect
payment system for office-based
medical oncology. But with the demise
of profitability from “buy and bill”
coupled with RBRVS, it is my belief that
community oncology will not survive
without more innovative payment
systems. Right now, my consulting
practice is seeing many physician
cancer clinics in the death spiral. This
means practices cannot bring enough
money in to pay their drug bills, and
yet, if they do not bill drugs, they
cannot pay their drug debts or meet
their overhead. It is a dire situation.
If they want to do away with “buy and
bill” profitability, payors need to think
proactively as to the best payment
system to maintain community cancer
care. Otherwise, the only financially
viable alternative may be the hospital
outpatient department.
References
1. American Society of Clinical Oncology. CPT, RBRVS,
RUC: a primer on the alphabet soup of coding and
reimbursement. J Oncol Pract. 2007;3(1):20-22.
2. Bodenheimer T, Berenson R, Rudolf P. The primary carespecialty income gap: why it matters. Ann Intern Med.
2007;146(4):301-306.
3. Based upon RemitDATA’s database of 1,700+ oncologists.
Copyright RemitDATA, Inc. All rights reserved.
*CPT is a trademark of the AMA. All rights reserved.
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